Supervalu Saga as Cautionary Tale on Strategies

The distributor’s announcement earlier this month that it’s reviewing strategic options and considering a possible sale of the company has taken its situation to a new level and generated lots of opinions on what’s ahead (much of it not too optimistic).

Wolf is mixed about criticisms of Herkert, contending that this executive had some good ideas but should have been brought in earlier, before the situation deteriorated futher. Still, Herkert himself may have waited too long to make heavy price investments, Wolf added.

So if Supervalu’s is a cautionary tale, what does Wolf believe are the key lessons?

First, that acquisition prices need to be in line, which wasn’t the case with the Supervalu-Albertsons deal, he said. Second, and possibly most important, that it’s crucial to “maintain market share first, rather than earnings, because eventually you’re going to have to maintain market share anyway.”

That last comment represents particularly sound advice that applies well beyond the Supervalu situation. But like a lot of things, maintaining market share is easier said than done, especially for a company with squeezed financial resources.